The rule imposing liability for breach of the peace in repossession is based upon a long-standing public policy, dating back to early American law, regarding the exercise of force or violence and recognizes that society’s interest in preserving the peace is supreme over the secured creditor’s right to possession of the creditor’s collateral. When a secured creditor chooses to pursue a non-judicial repossession, the secured creditor assumes the risk that a breach of the peace might occur. Additionally, courts are hesitant to recognize an affirmative defense to breach of the peace except to allow the repossessing creditor to show that a breach of the peace did not occur.
Generally, courts do not look kindly on self-help repossession, but most courts have recognized that, without self-help repossession, a creditor would always have to go to the courts for relief. The burden on the courts and the financial burden on the creditors would raise the cost of credit to society in general.
Under the Uniform Commercial Code (UCC) a secured party has the right to take possession, after default, through self-help repossession, so long as the secured party does not breach the peace. The UCC does not define what a breach of the peace is. If the debtor believes the repossessing creditor has breached the peace, the debtor must bring a suit claiming a breach of the peace. A court will then decide whether the creditor has breached the peace in repossessing the collateral, based upon the facts of the specific case.
Generally, four considerations are taken into account as to whether the court will find that a breach of the peace has taken place: (1) the potential for violence in the repossession; (2) actual violence during the repossession; (3) presence of uniformed police officer at the repossession; and (4) the extent that the creditor or the creditors agent had to encroach upon the debtor’s or a 3rd party’s property to repossess the collateral.
Each of the four considerations are very fact specific and based heavily on case law. If you are a creditor is important, when faced with a claim for breach of the peace, that you evaluate all facts leading up to and during the repossession to determine whether the four considerations listed above are implicated and to what degree they are implicated. If you are a debtor that believes that a breach of the peace has occurred you must also consider the extent that the facts leading up to and during the repossession implicate the four considerations listed above.
Whether you are debtor or creditor, it is important to engage legal counsel in evaluating whether a breach of peace has occurred during a repossession.